Lawmakers warn Russian banks against giving up data under US FATCA

The head of the Lower House financial markets committee said that until Russia passes a law, any report to US tax authorities about a client accounts in Russian banks would be considered a violation of bank secrecy.

MP Natalya Burykina (United Russia) added that bank employees who
permit it could face criminal prosecution. She also said that if
the United States applies sanctions to Russian banks for refusing
to comply with the requirements of the Foreign Account Tax
Compliance Act (FATCA), Russia would reciprocate with similar
sanctions.

Under current Russian law, the illegal collection of data that
falls under the definition of commercial, tax or bank secrets is
punished by fines of up to 80,000 rubles (about $2,285), or up to
two years behind bars. Illegal disclosure or use of such
information without the consent of its owner can be punished by
up to 200,000 rubles in fines ($5700), a prison term of up to 3
years, and a 30-year ban on occupying certain official or
commercial posts.

The Foreign Account Tax Compliance Act was passed in the United
States in 2010 and will come into force on July 1 this year. It
requires foreign financial institutions to report to the US tax
authorities about their American clients and even persons who are
connected with US citizens or suspected of being such. The
non-compliant banks outside the US can face punishment – US
entities making payments to such institutions are required to
withhold 30% of the gross sum.

Russia has already prepared a bill that would regulate relations
between Russian banks and their US counterparts. The draft was
approved by the Finance Ministry and the Central Bank, but in
mid-May this year the Lower House sent it back for reworking,
saying that passing such legislation required a two-sided treaty
between Russia and the US that would specify the obligations of
both parties and the responsibility to failing to observe these
obligations.

MP Anatoly Aksakov (Fair Russia) told reporters that the bill
would be finished before June 1 and it will include both the type
and amount of information that Russian banks can send to US
authorities and the requirement that the information transfer
must be performed only on condition of the client’s consent.

Earlier this month, Russia’s Financial Ombudsman Pavel Medvedev
complained about the country’s banks’ refusal to work under the
FATCA, saying that this undermined the international financial
cooperation parts of which could be beneficial to the Russian
state. Medvedev was commenting on the President’s order to
develop a working scheme allowing enforcement of the ban on civil
servants’ and officials’ foreign assets through cooperation with
foreign banks. As Russian banks had earlier refused to
participate in the US FATCA project, the Russian authorities
should not now count on cooperation from the West, Medvedev
noted.